Emerald Holding, Inc. reported a smaller loss in the fourth quarter and saw sales more than double as the company benefited from the return of trade show events.

Emerald traditionally has hosted over 140 events each year, including Outdoor Retailer, Surf Expo, The Sports Licensing & Tailgate Show, Impressions, Swim Collective, and Active Collective in the active lifestyle space.

Highlights of the full year ended December 31

  • In 2021, Emerald traded 63 in-person trade shows, conferences and other events with more than 129,000 attendees and 7,500 exhibiting companies;
  • Completed the acquisition of MJBiz on December 31, 2021 for initial consideration of $120 million plus potential contingent consideration, subject to the performance of MJBiz in 2022.
  • Net loss of $78.1 million for full-year 2021, compared to a net loss of $633.6 million for full-year 2020;
  • Full-year net loss included non-cash charges of $39.9 million and $680.2 million for 2021 and 2020, respectively, related to the impairment of goodwill and certain intangible assets;
  • Adjusted EBITDA, a non-GAAP measure, of $45.7 million for the full-year 2021 compared to $71.9 million for the full-year 2020;
  • Cash generation increased as bookings for returning events accelerated;
  • Cash provided by operations of $90.0 million for the full-year 2021 compared to cash used in operations of $37.1 million for the full-year 2020;
  • Emerald generated free cash flow, a non-GAAP measure, of $83.4 million for the full-year 2021 as compared to negative free cash flow of $41.1 million for the full-year 2020;
  • Emerald bought back 2.5 million shares at an average price of $4.94 per share during the year;
  • The impact of event cancellations and date postponements on operating income was partially offset by claim payments received under Emerald’s event cancellation insurance policy. Emerald is actively pursuing the collection of the remaining unpaid amounts of filed insurance claims for its canceled and impacted 2020/21 events;
  • Emerald has submitted $249 million in claims, which represents the net amount of budgeted gross revenues, less avoided costs for impacted or canceled events previously scheduled to take place in 2020/21;
  • Insurance claim payments received to date total $184.4 million, of which $89.1 million was received in 2020 and $95.3 million was received in 2021;
  • Additional $20.0 million in insurance claim payments recently approved and a pending receipt will be recognized in 2022;
  • Emerald currently has pending claims of $64.7 million and anticipates the submission of an additional $45 million in claims over the next 60 days; and
  • Emerald ended the year with $231.2 million in cash and full availability of its $110 million revolving credit facility.

Hervé Sedky, Emerald’s president and CEO, said, “This continues to be an exciting time at Emerald as we plan for a full slate of events in 2022 combined with steadily improving bookings as we look out to the balance of the year. This points to substantial year-over-year revenue and EBITDA growth as the recovery fully takes hold. While the recovery is providing a significant tailwind to our financial results, we have also been working to optimize the growth profile of our portfolio through acquisitions and the development of new shows in attractive end markets. In the fourth quarter, we acquired the highly coveted MJBiz, the leading B2B media company with the largest, must-attend event in the cannabis industry. We have also had success expanding our high growth, software as a service, B2B eCommerce platform as we strive to engage with our customers 365 days a year while creating a new, high-value revenue stream at Emerald. Lastly, we have made strong progress developing several new trade shows which either extend from existing industries we are in, such as the SIAL America launch in the food category or will bring us into new, high-growth industries which we will announce and launch in 2022 and 2023. Looking ahead, we expect to continue to evaluate acquisition candidates to further drive improved growth and profitability in the years to come.”

David Doft, Emerald’s CFO, added, “We are in a strong position as we ended the fourth quarter with more than $231 million of cash on our balance sheet, and we expect to see the continuation of the positive dynamics of our business model play out with the emergence of our full calendar of events. This should lead to an acceleration in forward bookings, driving negative working capital and strong free cash flow generation. Additionally, our business requires relatively little in the way of capital expenditures to maintain our shows and grow, which positions our team to strategically allocate capital to our growth initiatives. As our growth initiatives take hold and the exhibition industry continues its expected recovery in 2022, we expect to achieve full-year 2022 revenues in excess of $300 million and Adjusted EBITDA in excess of $50 million, net of $10 million of anticipated investment in growth initiatives and excluding any recoveries from insurance. Furthermore, we continue to make progress with our event cancellation insurance recoveries, with an additional $20.0 million of claim payments recently approved and pending receipt. We intend to maintain our expense discipline in the coming year, taking a thoughtful approach to capital allocation that balances investments in our business, growth through acquisitions and share repurchases, where over the last year we have repurchased 2.5 million shares.”

COVID-19 Operational And Expected Insurance Recovery Update
Emerald said it remains focused on the health and safety of its employees and customers. The company recently implemented a flexible hybrid work model, actively returned to in-person events beginning in July and continued through the remainder of 2021.

The spread of COVID-19 and the resulting limitations placed on travel and gatherings had a material impact on its ability to deliver large, in-person venues which necessitated show calendar changes. To date, Emerald has canceled a total of 132 events. Of the 132 canceled events, 94 were scheduled to stage in 2020, representing $230.6 million of 2019 revenues, 36 were scheduled to stage in 2021 and two were scheduled to stage in 2022. Of the 37 events that were canceled in 2021, 17 were staged in the prior year, representing $75.7 million of 2020 revenues, 16 were canceled in both 2021 and 2020, representing $44.8 million of 2019 revenues and the remaining 4 were newly acquired or new launches in 2021. Of the two events canceled in 2022, one staged in 2020, representing $0.5 million in 2020 revenues and one was canceled in both 2021 and 2020, representing $0.4 million of 2019 revenues.

Emerald maintains event cancellation insurance to protect against losses due to the unavoidable cancellation, postponement, relocation and enforced reduced attendance at events due to certain covered causes. Specifically, for the policies covering the calendar year 2020/21, these causes include event cancellation caused by the outbreak of communicable diseases, including COVID-19. Coverage for the outbreak of communicable disease, including COVID-19, is not included in Emerald’s event cancellation insurance policy for events scheduled to be held in 2022. Emerald’s policies for the 2020/21 calendar years provide coverage for the budgeted amount of gross revenues (less avoided costs, plus certain costs relating to the taking of remedial action) for each of the company’s individual events and conferences occurring within the covered years. The aggregate limit under these event cancellation insurance policies is approximately $191.1 million in 2020 and $191.4 million in 2021. The new policy for 2022 has an aggregate limit of $100 million if losses arise for reasons within the scope of the policy.

In addition to these primary policies, Emerald maintains separate event cancellation insurance policies for the Surf Expo Summer 2020, Surf Expo Winter 2021, Surf Expo Winter 2022, and Surf Expo Summer 2022 shows, with respective coverage limits of $6.0 million, $7.7 million, $8.4 million and $6.5 million. Similar to the primary event cancellation insurance policies, coverage for the outbreak of communicable disease, including COVID-19, is included for the policies covering Surf Expo Summer 2020 and Surf Expo Winter 2021, but not included for the policies covering Surf Expo Winter 2022 and Surf Expo Summer 2022.

In total, Emerald has submitted insurance claims of $249 million. The company has submitted insurance claims for each of its 2020 canceled shows. For events previously scheduled to take place in 2020, Emerald has submitted approximately $167 million in claims, which represents the net amount of expected gross revenues less avoided costs for canceled events scheduled to take place in 2020. Insurance claim payments for 2020 events received to date total $141.4 million, of which $89.1 million was received in 2020, and $52.3 million was received in 2021. The company has also submitted additional claims of approximately $82 million for events canceled or otherwise impacted in 2021. In October 2021, the company received an interim payment of $43.0 million related to outstanding 2021 event cancellation claims. An additional $20.0 million of claim payments was recently approved and is pending receipt.

Emerald is actively pursuing collection of the remaining unpaid amounts of filed insurance claims for its canceled or otherwise impacted 2020/21 events. On February 22, 2021, the company filed a complaint in Federal District Court in Orange County, California against its event cancellation insurers under the company’s 2020 and 2021 event cancellation insurance policy. The company believes the insurers have acted in bad faith and failed to timely pay amounts due and owing on submitted claims. Under its complaint, the company is seeking to enforce its rights under the policies to receive the maximum applicable coverage for the 2020 and 2021 event cancellations, postponements and reductions, and to receive court-ordered payment on all outstanding submissions for 2020 and 2021 events.

While there is no guarantee or assurance as to the outcome of this litigation or the amount or timing of future recoveries from the company’s event cancellation insurance policies, the company believes that all events that have been impacted, canceled, or postponed due to COVID-19 during 2020/21 to date should qualify as covered losses under the event cancellation insurance policies and that, to date, the insurers have paid less than what is owed under the policies.

Financial And Operational Results, Quarter Ended December 31, 2021
For the fourth quarter of 2021, Emerald reported revenues of $41.1 million compared to revenues of $12.2 million for the fourth quarter of 2020, an increase of $28.9 million or 236.9 percent. The primary driver of the increase was $21.7 million in revenues related to live events that were staged in the fourth quarter of 2021 but had been canceled in the prior year due to COVID-19. When compared to their last in-person edition, revenue for these events was down $15.3 million, or 41.3 percent. Organic revenues for the fourth quarter of 2021 were $12.1 million, representing organic revenue growth of $2.7 million, or 28.7 percent, as compared to the prior-year fourth quarter organic revenues of $9.4 million, due primarily to a $1.8 million, or 82.5 percent, increase in revenues from several events that staged in the fourth quarter of 2021 as well as the fourth quarter of 2020. In addition, print and digital advertising revenues increased by $1.9 million or 32.9 percent when compared to the fourth quarter of 2020. These organic increases were offset by lower virtual event revenues which primarily declined as a result of the return of live events in the second half of 2021. The PlumRiver, LLC and EDspaces acquisitions, which closed in the fourth quarter of 2020, as well as the Sue Bryce Education acquisition, which closed in the second quarter of 2021, contributed $7.3 million of revenue in the fourth quarter of 2021. Discontinued Other Marketing Services representing $2.8 million of fourth-quarter 2020 revenues also impacted fourth quarter 2021 results.

The company recognized a net loss of $7.3 million for the fourth quarter of 2021 compared to a net loss of $33.9 million for the fourth quarter of 2020. The decrease in loss was primarily attributable to the increase in revenues related to the return of live events in the second half of 2021 and higher event cancellation insurance claims proceeds being received during the fourth quarter of 2021. The company recorded $59.9 million of Other Income during the fourth quarter of 2021 as a result of the receipt of event cancellation insurance claims proceeds related to events canceled in the second half of 2020 and the first half of 2021 compared to $42.7 million of Other Income recorded during the fourth quarter of 2020 as a result of the receipt or confirmation of event cancellation insurance claims proceeds related to events canceled in 2020. In the fourth quarter of 2021, in connection with the performance of its annual goodwill impairment assessment, the company recorded a $7.2 million non-cash charge, as well as a $32.7 million non-cash charge related to the impairment of certain trade names and customer relationships. In the fourth quarter of 2020, in connection with the performance of its annual goodwill impairment assessment and primarily as a result of certain underperforming brands, the company recorded a $15.2 million non-cash charge, as well as a $17.4 million non-cash charge related to the impairment of certain trade names and customer relationships.

For the fourth quarter of 2021, Adjusted EBITDA was $52.6 million, compared to $18.3 million for the fourth quarter of 2020. The increase in Adjusted EBITDA of $34.3 million was mainly due to profits generated by the live events that were staged during the quarter and the higher confirmed or received event cancellation insurance claims proceeds described above. The company’s Adjusted EBITDA throughout 2021 has been heavily impacted by the timing and receipt of approved claim payments under the company’s event cancellation insurance policy.

Financial And Operational Results, Year Ended December 31, 2021
For 2021, Emerald reported revenues of $145.5 million compared to revenues of $127.4 million for 2020, an increase of $18.1 million, or 14.2 percent. The primary driver of the increase was $85.1 million in revenues related to live events that were staged primarily in the second half of fiscal 2021 but had been canceled in the prior year due to COVID-19. When compared to their last in-person edition, revenue for these events was down $101.2 million, or 54.3 percent. The increase was offset by a $75.7 million reduction from the cancellation of nearly all events scheduled to stage in the first half of fiscal 2021 due to COVID-19. Organic revenues for fiscal 2021 were $43.8 million, representing organic revenue decline of $0.3 million, or 0.7 percent, as compared to the prior year organic revenues of $44.1 million, due primarily to a $6.4 million, or 35.0 percent, decrease in revenues from several events that staged in both fiscal 2021 and 2020. This decline was largely attributable to one event that staged pre-COVID in January 2020 and was the company’s only large event to stage in the first half of fiscal 2021. This decrease was offset by a $3.8 million, or 16.1 percent, increase in print and digital advertising revenues and a $2.5 million, or 223.4 percent, increase in virtual event revenues. The PlumRiver and EDspaces acquisitions which closed in the fourth quarter of 2020, together with the Sue Bryce acquisition, which closed in the second quarter of 2021, contributed $16.6 million of revenue in fiscal 2021. Discontinued Other Marketing Services representing $7.6 million of fiscal 2020 revenues also impacted fiscal 2021 results.

The company incurred a net loss of $78.1 million for fiscal 2021 compared to a net loss of $633.6 million for fiscal 2020. The decrease in net loss was primarily a result of lower non-cash goodwill, trade name and customer relationship impairment charges during the current year offset by lower Other Income from event cancellation insurance claims proceeds received or confirmed. In fiscal 2021, as a result of the performance of its annual goodwill impairment assessment, the company recorded a $7.2 million non-cash charge, as well as a $32.7 million non-cash charge related to the impairment of certain trade names and customer relationships. In fiscal 2020, in connection with the performance of its annual goodwill impairment assessment, the company recorded a $15.2 million non-cash charge, as well as a $17.4 million non-cash charge related to the impairment of certain trade names and customer relationships. In addition, as a result of a triggering event caused by reduced performance expectations in fiscal 2020, the company recorded non-cash charges of $588.2 million and $59.4 million, respectively, related to the impairment of goodwill and certain trade names and customer relationships. The company recorded $77.4 million of Other Income during fiscal 2021 as a result of the receipt of event cancellation insurance claims proceeds related to events canceled in 2020 and the first half of 2021. In fiscal 2020, the company recorded Other Income of $107.0 million from cancellation insurance proceeds received or confirmed related to events canceled in March through December of 2020. In addition, the decrease in net loss was partially offset by a $56.3 million decrease in benefit from income taxes compared to the prior year.

For 2021, Adjusted EBITDA was $45.7 million, compared to $71.9 million for 2020. The decrease in Adjusted EBITDA of $26.2 million or 36.4 percent was mainly due to lower confirmed or received event cancellation insurance proceeds described above offset by profits generated by the return of live events in the second half of 2021. The company’s Adjusted EBITDA has been and will continue to be heavily impacted by the timing and receipt of approved claim payments under the company’s 2020 and 2021 event cancellation insurance policies.

Cash Flow
Net cash provided by operating activities was $53.7 million in the fourth quarter of 2021, compared to $5.6 million in the comparable period of the prior year. This improvement largely reflected the receipt of $59.9 million of event cancellation insurance claims proceeds during the fourth quarter as well as increased customer deposits related to the large number of shows scheduled to stage in the first half of 2022. As a result of fourth-quarter 2021 refund payments of $3.7 million and transfers of $8.0 million of customer funds from canceled events to contracts for future events, as of December 31, 2021, canceled event liabilities decreased to $9.8 million as compared to $21.6 million at September 30, 2021.

Capital expenditures were $2.4 million for the fourth quarter of 2021, compared to $0.9 million for the fourth quarter of 2020.

Free Cash Flow, which the company defines as net cash provided by operating activities less capital expenditures, was an inflow of $51.2 million in the fourth quarter of 2021, compared to $4.7 million in the fourth quarter of 2020.

Emerald acquired MJBiz in the fourth quarter of 2021 for an aggregate amount of $118.2 million, which represented the initial cash payment. Given the cash outflow for the acquisition, Emerald ended the fourth quarter of 2021 with $231.2 million of cash as compared to the third quarter of 2021’s cash balance of $303.6 million.

For the full year, net cash provided by operating activities was $90.0 million in 2021, compared to cash used in operating activities of $37.1 million in the prior year. This improvement largely reflected the receipt of $95.3 million of event cancellation insurance proceeds during the year as well as increased customer deposits related to shows scheduled to stage in the first half of 2022. As a result of the cancellation of events scheduled to stage in 2021, refund payments and the transfer of customer funds from canceled events to contracts for future events, as of December 31, 2021, canceled event liabilities decreased to $9.8 million as compared to $25.9 million at December 31, 2020.

Capital expenditures were $6.6 million for fiscal 2021, compared to $4.0 million for fiscal 2020.

Free Cash Flow, which the company defines as net cash provided by (used in) operating activities less capital expenditures, was an inflow of $83.4 million in fiscal 2021, compared to an outflow of $41.1 million in the prior year.

Photo courtesy Emerald